Temporary restricted without release accounts

[St Pats Treasurer]

If I set up an equity account for a specific (i.e. temporarily restricted) purpose, and I only use income and expense accounts that close to that equity account, why do I need to add release transactions? This is an issue of clarity and simplicity - none of the people who look at my reports understand, nor do they want the confusing details related to moving money around within the accounting system.

I am even tempted to set up a completely different fund for outreach since it is not part of the operating budget, and it only uses income and expense accounts that are not shared with the operating budget.

Why do you set up a restricted equity account for something that is part of the operating budget just because people are voluntarily defraying some of the cost of that particular operating expense? As an example, contributions for flowers never approach our total cost, and the intent is to defray some of the cost, not to designate its use above and beyond the budgeted amount.

With the purchase of PC+, I want to simplify reporting to my Vestry, not complicate it. Note: Avg Sunday attendance is around 30.

[NeilZ]

If I set up an equity account for a specific (i.e. temporarily restricted) purpose, and I only use income and expense accounts that close to that equity account, why do I need to add release transactions? This is an issue of clarity and simplicity - none of the people who look at my reports understand, nor do they want the confusing details related to moving money around within the accounting system.

I am even tempted to set up a completely different fund for outreach since it is not part of the operating budget, and it only uses income and expense accounts that are not shared with the operating budget.

Why do you set up a restricted equity account for something that is part of the operating budget just because people are voluntarily defraying some of the cost of that particular operating expense? As an example, contributions for flowers never approach our total cost, and the intent is to defray some of the cost, not to designate its use above and beyond the budgeted amount.

With the purchase of PC+, I want to simplify reporting to my Vestry, not complicate it. Note: Avg Sunday attendance is around 30.

You need to have release accounts in a double entry system, as this is the mechanism used to move funds from the restricted Fund Balance account to the unrestricted fund Balance account which is where the main checking account closes to. Without them, you'd have an unrestricted fund balance (net assets) being drained and a restricted fund balance showing plenty of funds, when in reality, they're gone.

If you have a separate checking account for that outreach, I would definitely use a separate accounting fund, however, if the same checking account is used, you have that option of keeping it in the main accounting fund, or moving it off to its own Accounting Fund. This does mean that you're adding to the paperwork as you'd have to print a separate I&E report if you want those transactions to be separate from the operations I&E

As far as flowers, again, if this is something you really want to track in Accounting, its better to have it as a restricted fund so you can show what is coming in and what is going out. This provides more disclosure and actually protects you the treasurer/bookkeeper as it reflects funds being used in more detail.

You don't have to create a separate release account for every restricted fund, however, having them increases transparency. Frankly, I was the Office Admin at different church from where I am a member, and having the release accounts kept everything out in the open. Any questions as to where the funds were and how they were spent were aided by having the release accounts as I could show the expense, and where the funds were transferred from.

The Session of the church, once I gave them the briefing about what the I&E reports discloses, were extremely happy to see that funds were being properly handled, as the previous bookkeeper, who did not have an automated system, kinda kept them in the dark.

Example:

I have a restricted fund and I need to use $31000.00 of that to purchase an item. The unrestricted net assets (fund balance) has a balance of 29000.00, the restricted fund has 32000.00.

I create the invoice then write the check. With no release accounts, the unrestricted net assets would show a balance of -2000.00, and the restricted fund balance still shows 32000.00.

With release accounts the after the check is written, the unrestricted net assets show 29000.00, and the restricted shows 1000.00

You have a fully transparent view of where the funds are

Does this help?

[St Pats Treasurer]

It is the income and expense accounts that impact the equity or fund balances. When you set up a new income or expense account, PC+ asks what equity account this should "close to". Assets and liabilities do not directly impact the fund / equity balances (unless you do some rather unorthodox journal entries).

I understand - if you are using a normal expense account that closes to your unrestricted fund, you must do the release transaction to shift the money from the restricted equity to the unrestricted equity. For our outreach, we have a separate set of expense accounts that are only used for that purpose. I would like to set up my chart of accounts so that they close to the outreach equity account.

I still have the demo PC+ on a separate PC (purchased copy loaded on new laptop). With it, I can experiment. Here is what I found:
I created an expense account that closes to the restricted equity account. When paying the expense, I used the release from restriction functionality. I started with $500 in the restricted equity account. I paid an expense of $200 dollars. The balance sheet now shows $100 left in the restricted equity account, and the unrestricted equity increased by $200. It makes sense when you think about it:

Account Account description Debit Credit
01-1110-000 Checking account 200.00 CR
01-4850-201 Test accnt release 200.00 DB "closes to" restricted equity account
01-4999-000 Released from restriction 200.00 CR "closes to" unrestricted equity
01-5415-201 Restricted expense accnt 200.00 DB "closes to" restricted equity account
Ugh! The spacing is lost when you actually post, so my nice little table collapses.

I promise to use the release transactions when they seem appropriate. Thank-you for helping me think this through.

I have been doing all of my treasurer work using Quick Books for 10+ years. I am thrilled to be transitioning to a true fund based accounting system.
David.

[NeilZ]

It is the income and expense accounts that impact the equity or fund balances. When you set up a new income or expense account, PC+ asks what equity account this should "close to". Assets and liabilities do not directly impact the fund / equity balances (unless you do some rather unorthodox journal entries).

I understand - if you are using a normal expense account that closes to your unrestricted fund, you must do the release transaction to shift the money from the restricted equity to the unrestricted equity. For our outreach, we have a separate set of expense accounts that are only used for that purpose. I would like to set up my chart of accounts so that they close to the outreach equity account.

I still have the demo PC+ on a separate PC (purchased copy loaded on new laptop). With it, I can experiment. Here is what I found:
I created an expense account that closes to the restricted equity account. When paying the expense, I used the release from restriction functionality. I started with $500 in the restricted equity account. I paid an expense of $200 dollars. The balance sheet now shows $100 left in the restricted equity account, and the unrestricted equity increased by $200. It makes sense when you think about it:

Account Account description Debit Credit
01-1110-000 Checking account 200.00 CR
01-4850-201 Test accnt release 200.00 DB "closes to" restricted equity account
01-4999-000 Released from restriction 200.00 CR "closes to" unrestricted equity
01-5415-201 Restricted expense accnt 200.00 DB "closes to" restricted equity account
Ugh! The spacing is lost when you actually post, so my nice little table collapses.

I promise to use the release transactions when they seem appropriate. Thank-you for helping me think this through.

I have been doing all of my treasurer work using Quick Books for 10+ years. I am thrilled to be transitioning to a true fund based accounting system.
David.

Actually, any time you write a check, or make a deposit, the system updates the net assets/equity accounts. Most expense accounts close to the unrestricted net assets account.

What I've done in the 4 churches I've setup Powerchurch accounting is segregate the expense accounts by area. I've had missions/outreach as donor restricted accounts, and the expense accounts for ministry area, setup as normal expense accounts that close to the unrestricted net assets. The release accounts in this case move the funds as I described earlier to cover the check I would write from unrestricted net assets.

However, if you need to show the I&E for Mission/Outreach set it up as a separate accounting fund. You can still use one checking account, just need to make sure you use the 02-1110-000 checking account rather than the operation 01-1110-000 checking account. Its the same BANK account, but it points to the different Accounting Fund net assets account. The system handles keeping the funds separate, and when you do the bank reconciliation, all the checks you write will show up under the reconciliation.

I agree, moving from QB to Powerchurch is a big step. For one, Powerchurch is setup as CASH only. Churches do not (SHOULD NOT) operate under accrual accounting. Its all cash in hand. Then moving to double entry accounting can be an even bigger step, as QB would do a lot of the stuff 'under the hood', but what gives you is a fully transparent view of how the funds move around.

FWIW ... you can install your copy of Powerchurch on as many church computers you want, its a site license not restricted to one computer. However, if you're going to be using all the other modules in Powerchurch (Contributions & Membership), I would set it up on the network so that any church admin can access the membership module. Powerchurch will allow you to grant access to individual modules and the users can't access anything else.